Eligibility determination is actually fairly simple; here are the highlights:

-10% or $8000 tax credit, whichever is less. Unless the sale price of the home is under $80,000, your buyer’s should be eligible for the full $8000.

-income limits.

 Single? Full credit up to $75,000 annual income; with pro-rata credit given for income between $75,001 and $95,000 (how many single First Time Home Buyers do you have making more than $75,000?)

 Married? Full credit up to $150,000 annual income, with pro-rate credit given for income between $150.001 and $170,000 (again, how many married First Time Home Buyers are making more than $150,000?)

-Type of home? Straight from the IRS….. Your main home is the one you live in most of the time. It can be a house, houseboat, housetrailer, cooperative apartment, condominium, or other type of residence.

-Repayment question? Again, straight from the IRS…..You must repay the credit only if the home ceases to be your main home within the 36-month period beginning on the purchase date. This includes situations where you sell the home, you convert it to business or rental property, or the home is destroyed, condemned, or disposed of under threat of condemnation. You repay the credit by including it as additional tax on the return for the year the home ceases to be your main home. If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit.

-Who can claim the credit if unmarried buyers? Once again, from the IRS…If two or more unmarried individuals buy a main home, they can allocate the credit among the individual owners using any reasonable method. The total amount allocated cannot exceed the smaller of $7,500 ($8,000 if you purchased your home in 2009) or 10% of the purchase price. Note. A reasonable method is any method that does not allocate all or a part of the credit to a co-owner who is not eligible to claim that part of the credit.

-Newly married spouses, what happens? If newly married, and one spouse owned a primary residence in the last three years, and the other did not, L Per the IRS….You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.

99% of first time home-buyer’s questions will fall into the above scenarios. Obviously, unique situations should be run through a tax accountant or attorney, but most questions should be addressed above.

The new restrictions on MI:

-Maximum loan to value is 90%

-Minimum 740 credit score

-Primary residence only, single family only

-Maximum debt to income ratio is 38%

-two months PITI cash reserves required for transactions less than $417,000.

Wow!!

While ‘technically’ that is true; there are some major restrictions, as indicated by the following:

Super Bowl is over…great game…now no football until next fall…sigh.

So on to mortgage rates! Face Book, being the new ‘in’ place for people in Real Estate and Mortgage Lending, has seen much discussion about 4.500% (ok, most of it started by me).  Also, after my little talk at the Salem Association of Realtors meeting last month I’ve had a number of people n the industry ask if my prediction of rates in the mid-4′s is still going to come true.

Obviously  no one has a cystal ball. People are nervous as rates have climbed the last week, with 30 year fixed opening today at 5.25% (not a bad rate, but not where we want them).  Am I panicking? No.. Am I growing inpatient?? Of course!!! I’m a guy!!

Seriously though; if we were watching the FNMA 4.500% coupon lost value to the point where it was under 100.00 I’d be getting nervous, but today it’s up 30 BPS from Friday’s close, at 101.05. That means the rates in the mid-4′s are certainly possible, and perhaps not that far away.

So don’t despair! It’s sunny outside, spring is right around the corner, and we’re complaining about mortgage rates well under 6.000% !!! It’s really not that bad, rate-wise anyway. Now, if the rest of the economy can get its act together….

Have a great week!

jay

I still think we’re headed for that rate, and the reason is stated in the following mortgage marker commentary received late today:

MBS prices continue to climb(rates fall)after results of Treasury’s 2yr note auction showed more than expected demand; bid to cover ratio 2.69 to 1. FNMA 4.5% coupon 101.58bps & FNMA 4.0% 100.38bps; +29BPS! Favorable repricing is possible.

What does this mean? Simply that ‘technically’ the market is indicating that rates should be at 4.500%, and that even a 4.00% loan should be available at some point. What you’re seeing is that Fannie Mae Coupons are selling at a premium at both 4.500% and 4.00%, meaning secondary are very interested in purchasing mortgage backed securities at those rates.

The reason why wholesale lenders and banks aren’t offering these significantly better rates? It’s still the same answer as before…CAPACITY. There are far fewer wholesale lenders and banks left willing to lend on mortgages. There are far fewer lines of credit for wholesale lenders to access to generate mortgage loans, thus, mortgage credit is tighter.

Wholesale mortgage lenders are still reeling from the influx of applications when rates dipped to 4.875%-5.000%. Underwriting times are running in double-digits as far as days needed to review files. Banks and wholesale lenders simply can’t handle the volume that would result from lowering rates to 4.500% at the present time.

Rates are still very good. If you, a friend, or a family member are interested in purchasing, start looking! If you’re refinancing please get your paperwork in to me so I can register your loan with one or more lenders, and be prepared to lock your rate when it drops to where you want it.

Hope this helps explain what’s happening and why. Please let me know if you have any questions

-FHA down payment is now 3.5%, and FHA loan limits have decreased in many areas to $271,050

-LLPA’s are taking effect now (Loan Level Price Adjustments). This simply means that for everything but a true, ‘vanilla’ loan, there is likely an adjustment to the interest rate. Adjustments are rarely, if ever, a positive thing, so when you’re thinking adjustment think ‘higher’ rate. For example, for credit scores below 700 there will most likely be an increase to the interest rate for a purchase if the buyer is putting less than 30% down (that is not a typo!! a interest rate ‘hit’ wil lnow occur with less than 30% down at lower credit scores, and under 700 is now considered lower).

Cash out refinances will now also be at a higher interest rate, unless your loan to value is at or less than 60%. In addition, Fannie Mae is no longer allowing cash out refinances above 90% (and some lenders are limiting cash out refinances to 85% loan to value).

Also, remember that FHA now requires 2 (two) appraisals for cash out refinances above 85% loan to value.

let me know if you have questions!

Rates have decreased substantially since December, with 30 year fixed rates hovering jsut under 5.00%, and FHA at an even 5.000%.  The even better news? Everything points to 30 year rates dropping to 4.500% in the next couple of weeks.

There will be a lot to blog about in the coming months. To begin, here’s an excerpt from one of today’s mortgage commentaries:

We’re not alone in thinking that 4.500% will be here, and soon!

It’s anticipated that the feds will be lowering the fed fund rate to .5% later today, which generally means the prime rate wil lfollow at 3.50%.

The question being asked today is how this will affect first mortgage rates?

Historically mortgage rates follow the lowering of the fed fund/prime rate about 50% of the time, meaning that the odds are even that rates will go up versus going down after today’s announcement. Using 2008 rate behavior changes the forecast however.

During 2008 mortgage rates temporarily increased EVERY time the feds lowered the fed fund/prime rate. The increased rates stayed around from 3 to 15 days before they settled back down to their previous level. 

Does this mean that’s what will happen today? Truthfully, no one knows. But don’t be surprised if we see rates spike slightly after the announcement today.

By the way, today’s rates are very good…4.875% conventional, and 5.25% FHA.

Have a great day!

By now you’ve heard that ‘the feds’ are talking about lowering interest rates for new home loans to 4.50%.  What a great thing that would be! That, in conjunction with the first-time home-buyers tax credit of up to $7500, should surely stimulate the economy, right?

Of course it would…..IF we knew when and how ‘the feds’ were going to make it happen.

Let’s take a moment to analyze the statement, “the feds are talking about lowering interest rates for new home loans to 4.50%”.

First, who exactly are ‘the feds’. This term is used most often generically, when a specific government entity can’t be identified. Most likely ‘the feds’ refers to Fannie Mae and Freddie Mac, and could also be referencing FHA. The truth is no one knows.

So now we have a big rumor about a plan that we don’t even know exists. So what’s that do for us? Put’s the housing market on hold, with buyers afraid to do anything because they may miss the 4.500% that we are even certain is coming.

Industry rumor indicates the 4.50% was mentioned by a lobbyist who heard the National Association of Realtors stating they would like to see a program for new home loans offering 4.50%. Wouldn’t we all? But at this point there’s nothing concrete about the plan.

4.500%….that’s a great rate…but what does it really do for the average homeowner? A mortgage of $180,000, at 5.25%, has a principal/interest payment of $992. The same loan at 4.50% has a principal/interest payment of $910,  a savings of $82 per month. Yes, that is an annual savings of $984, which will help the economy. But $984 a year won’t ‘save’ the economy.

Lastly, notice the language of the 4.50% rumor, (first published in the Wall Street Journal, which then circulated around the globe in 3.2 seconds). The language appears to indicate that this new rate is for purchases, not refinances. Again, no one knows for certain, but if/when the 4.50% program begins refinance customers may very likely be subject to free market pricing (which isn’t bad by any means, given today’s rates!).

So don’t believe everything you read or hear, even if it’s in the WSJ. While headlines sell newspapers, it doesn’t make the headline automatically true.

As I hear more you’ll see it posted here.

Have a great day!

With the recent announcement that the feds are actually going to invest in mortgages and loosen up mortgage credit we’ve had a very nice reduction in mortgage interest rates. This has caused many people to rethink their situation, and start looking at purchasing a new home. The purchase market doesn’t get much better than when you have the three following conditions:

-interest rates, both conventional and FHA, in the mid 5′s,

-housing prices near or at their lowest in years (down 21% nationally from their high a couple years ago), and

-a large number of listed properties available from which to choose.

The combination of these three results in a buyer’s market. The relative lack of mortgage activity also results in our being able to close most loans in less than a month, which certainly makes a buyer’s offer a little more appealing to a seller.

The question of the day? How long will rates stay where they’re at, and will they go down? Sad to say the ‘experts’ are evenly divided, and we don’t know from hour to hour where rates will be. Regardless though, when rates are under their historic average of 9.00% people should take action.

Have a great week!